 Welcome to Kondo Insider on Hawaii, Think Tech Hawaii. I'm your host attorney Nalan. Joining me today is our guest, Loree Maguire, partner at Porter Maguire Keakona Law Firm. She currently chairs the Legislative Action Committee of the Condominium Associations Institute, Hawaii Chapter. Today, we're fortunate to have Loree join us for discussion of the legislative bills that have or are about to become law in Hawaii in 2023 legislative session, which will impact condominium associations in Hawaii and also plant community associations. Aloha, Loree. Thank you so much for joining us today. Thank you, Nala, for having me. I appreciate it. I heard the Legislative Action Committee is being really busy this session and now that, like, Dust has settled a little bit and tell us a bit about where we are as far as the timeline, the legislature. Okay, well, the governor has until June 26th to veto the bills. And, you know, thereafter, we will know exactly which bills are going to be signed by him or which will be allowed just to come into law. I see. But we do have one, you know, act that has already been passed already this year, right? And it is kind of unique because it was passed with the 2-thirds, you know, way to overrate it. So can you help shed us some light on that? Sure, yes. That was actually pretty exciting. This is Senate Bill 921. And the purpose of the bill is to amend chapter 514b, 141c. And it involves the statute of repose. And it allows condominiums a reasonable opportunity to assert legal claims once the period for developer control has terminated. You know, previously, associations had only 10 years. There was a 10-year statute of limitations in order to bring a claim against a developer for construction defect. Well, as a result of Senate Bill 921, now associations have, pardon me, two years from the termination of developer control to bring their claims. And as you know, this bill was actually vetoed by the governor. It's my understanding it was the first bill he ever vetoed. And then both the Senate and the House were able to override that veto, which was a wonderful thing, I think for condominium associations. So for our, you know, like a non-attorney audience out there, can you help us, you know, explain a little bit about the difference between statute of limitation and statute of repose? Okay, the statute of repose actually extinguishes a right of action after a period of time has elapsed. A statute of limitations is a limitation brought on certain types of actions so that for example, let's say a breach of contract action, that has a six year statute of limitations. So from the time a party has breached a contract, the other party who is damaged by that breach has only six years to bring a claim against the party who breached the contract. So that's the statute of limitations. I see, so let's use the example, I mean, the typical construction de facto lawsuit for those, especially for those new condominiums, right? So homeowners will have claims against developer and general contractors, all the subs. But, you know, usually you won't discover about this problem until sometime after you leave there for certain period of time. So previously this 10 year statute of repose would cut off your rights if you don't take timely action. But with this new law, that means that kind of medium associations, homeowners now have more right against developers or contractors who caused construction defects in their project. Is that correct? Yeah, because you cannot bring an action so long as the developer remains in control. You have to wait for developer control to terminate. And so what has happened in the past, at least in certain circumstances is, the developer control has gone beyond 10 years. And therefore, if there were any construction defects, then those owners could not bring claims against that developer because the 10 year statute of limitations had expired. Thank you. Let's move on. Now I think the next session, we're gonna cover all these bills that are pending governor's action. You know, as Larry just explained, they were enrolled, they passed in the house and the Senate and they were enrolled to the governor. So the governor has until June 29th to consider whether to veto or to sign. And then of course, there's a process. Either the governor signs it becomes the law or if within timeframe the governor does not veto, they could also become law without the governor's signature. And then there's the veto and then there's also possibility Senate and the House could choose to override, which is rare as we just discussed. So these are bills that could or likely to become law in this session, which will have impact on the legal compliance for your condominium projects and plan community projects. So let's cover the first one, which is HB1509. What is this bill about? Okay, well, this bill actually establishes two task forces. And the first task force is established, or rather establishes a planned community association oversight task force. And they will be looking basically at chapter 514B which governs condominiums. Well, planned community associations are governed by chapter 421J. And just to give you an idea of the problems, 421J contains less than or approximately 25 different statutes as where the condominium chapter contains well over a hundred different statutes that cover just the gamut of issues and areas, right? And so what this task force is going to do is look at all of the condominium law to see if they can extend that law to apply to planned community associations to provide these planned community associations with more tools, if you will, to work with, to give them more authority, more power, more assets, if you will, in order to implement the various issues that condominiums have access to, or asses rather. So I guess for our audience, these condominium associations are basically created by statute, but usually for a planned community association, that's really based on the declaration CCNR, which is a restrictive covenants running with the land. There are a little bit different for planned community associations, if they incorporate to become a nonprofit corporation, then of course they can also utilize the nonprofit statute for their governance. So overall, but there's also concern about the reason why the state had the resources to sort of help or overseeing these condominiums actions is also because every condo unit will pay into these funds through the biannual registration, right? So does that mean, you know, if they do want to set up a new agency to oversee planned community associations, then the state will also start charging planned community association homeowners in order to have the funds to, you know, carry all this additional duty? Possibly yes, that's definitely being discussed. That is one of the things that they're talking about. So for example, condominiums, one of the things that the second task force that's being implemented is charged with doing is looking at condominium associations and all of those issues, right? And they also will be looking at the various dispute prevention issues that are involved in condominiums, such as mediation, binding arbitration, non-binding arbitration, efforts to settle cases before they actually get into court. Right now, planned community associations have access to some of that, but not near as much as condominium associations as to where condos have access to the education trust fund, the condo education trust fund, right? And that funds various mediations and other items. It's also going to now fund these task forces as well. So, you know, these task forces are doing these studies, they have to issue an interim report to the legislature 20 days before the 2024 session begins and then a final report to the legislature 20 days before the 2025 legislative session ends. So I anticipate that most likely the 2025 session may include new laws that gradually start to bring provisions that you can now find in 514B governing condominiums into the planned community association chapter 421J. I see. So we'll find out in the next legislative year, I guess. So let's move on to the next one, SB729. And this one is regarding condominium board leadership 20. And what is this about? Yes. Well, this actually expands the powers and the duties of the real estate commission because they've now been assigned by the legislature to develop a curriculum for leadership training or various members of boards of directors. So for example, this particular training is going to include things they need to know about HRS 514B, that's the chapter that governs condominiums. It will include standard provisions of the various governing documents, as well as the fiduciary duties of board members as stated in 414D, which is the non-profit statute. And for example, all board members have a fiduciary duty to act in good faith, right? They are also supposed to act in a manner that's consistent with the director's duty of loyalty to the association. They're supposed to act in a manner where the director reasonably believes to be in the best interests of the association. So the concern that was conveyed to the legislature by various constituents was that boards were not as informed as they should be about the law and about the governing documents and their fiduciary duties. So the legislature entered into a compromise because others were against this, because the concern is if board members are required to obtain an education about certain things, the concern is maybe more board members or rather more owners won't apply for the board. They won't seek to get appointed to the board. So they're looking into it to see if they can develop additional resources for these board members. That being said, currently, if you go on the website for the Real Estate Commission, you will find lots of educational tools for board members. Yes, and we actually had a session with the kind of medium education specialist earlier this year. I think we covered a lot of the resources, including the trendy like short video that meets everybody's attention span these days. Yes, exactly. Right, exactly. Yes. Okay, so let's move on to the next one, SB 855. And this one is a very important new law. It's regarding the condominium budgets, reserves, and especially regarding the Honolulu County's fire safety compliance rules, right? Can you help explain further about this one? Sure. This bill was actually promoted by Senator Fugunaga. She was the one championing this bill. And it actually amends by 14B 148 concerning budgets and reserve requirements. And it mandates that condominium associations now shall provide a summary of the required information in its budget. And it authorizes a condominium associations reserve study to forecast a loan or a special assessment to fund the new life safety requirements. So now reserves have to contain funding for these life safety requirements now required by the city and county of Honolulu, right? And so we're talking about potential sprinkler installations or if you've had this life safety evaluation, you know that there are certain condominiums that are in lieu of installing sprinklers, making other changes to their buildings to make them safer. So for example, I know a number of them are putting in new fire alarm systems. I mean, there's about I think 17 different components that have to do with this system. I do know though that before Senator Pukinaga came back to the legislature, she was on the city council and she was able to get this put on hold for now because of the outcry from condominium owners that they just could not afford these changes at this time. So this is being implemented to allow associations to have these requirements and fund for these requirements, but they can also forecast a loan for the, to fund these and also a special assessment for that purpose. So definitely more transparency and disclosures required for potential buyers who want to buy into a certain kind of project, right? That's a good news for those buyers for sure. And as we just mentioned, the initial law was passed the fire safety law in Honolulu was passed in 2018. And I think with the initial compliance cut off deadline, that's kind of unrealistic with so many buildings, they weren't prepared financially for such a huge expensive projects. And I think that compliance deadline keeps getting postponed, given all these outcries made by the government I think right now under the ordinance 22-02, the current timeframe that's given to the associations is like 13 years from May 3rd of 2018. So basically before May 3rd of 2031, right? There are not that many years left. And with this bill, basically it gives the alarm to all these associations. They really need to start saving towards the end of the year. They really need to start saving towards that if their project is subject to this rule, this law, right? Otherwise they won't be able to comply. Right, right. Well, and another thing that this rule has in it, or rather this statute has in it, is that now if associations are not funding a particular capital improvement requirement, they have to state that now in their reserves, in their budget and their reserve study. So, and they have to state why it's been omitted. So for example, in the past, associations weren't including funding for their pipe replacements, right? And that's because they were thought to last 50 years as opposed to 20 versus 30 years, right? So now that has to be included. That information, if it's not included, you've got to state what's not included and why it's not included. So that's very important because I think a lot of associations in the past have not included critical components. And also, I think clarifies that, because they do have the requirement that associations reserve study now needs to be done by like an independent professional. And they clarify that associations managing agent who has the ability to do it is able to do it. And that's not a conflict of interest. That's a good thing to clarify. Yes, that's a, you bring up a good point because I noticed this session, last session they amended this bill too and there were requirements. So they came back this session and tweaked it and now they have a definition for this independent reserve study preparer. And it means any organization, company or individual with a reserve study certification from an industry organization. Previously, they talked about this independent reserve study preparer but nobody knew what that meant because there was no definition for it. And reserve study, I'm sorry to cut off, like so reserve study specialist, that's a designation usually done by community associations institute like the TREAD organization, right? Yes, I see, absolutely. Yeah, so now it brings to the last one we're going to cover in this category because associations as are also employers you need to comply with employment law as well. This one is of data on employment law which is SB1057. And what is this one about, Larry? All right, well, the purpose of SB1057 is to reduce pay inequalities. And this particular bill requires certain job listings to include now an hourly rate or a salary range. The idea is to get the information out there so that you're not going to have people applying for jobs that don't pay what they're looking for. And in that way, it also promotes transparency. Everybody can see everything, including the current employees. They can see what the employer is now offering to the new employees and that way they can go to the employer and seek a raise if they feel they're qualified since they're paying this new person who hasn't done the job yet, a set fee. Assuming that amount is higher than that particular employee is making. So it equalizes the field, so to speak. It also prohibits an employer from discriminating between employees because of any protected class, protected category established under the law by paying wages to employees in an establishment at a rate that less than the rate at which the employer pays wages to other employees in the establishment for substantially similar work. So there again, they are leveling the playing field making sure that persons in a protected class are now covered and can get the same pay as anyone else doing that same job with the same qualifications. I see, but there are some exceptions, right? Not every position is subject to this new requirement. Right, yes, that's true. Hang on a second, let me look here. So I know that for example, if you're an employer and you have 50 or more employees, or I'm sorry, 50 or less employees, it does not apply to you. If you are a public employer and your employees utilize a collective bargaining agreement, it also does not apply to you. And also, if you are an employer and you are promoting someone within your company, let's say, or lateral moves within the company, it also doesn't apply to that situation. Yeah, so you just covered those protected categories from employer's discriminatory practices. I mean, there's one that's kind of unique is the arrest and court record, right? But I think the condo statute does have a special ride for a condominium higher end, like association employee background check that is in HRS 514B 133. So usually for a managing agent, resident, manager, security guard, you know, because these people have got to do the daily, you know, in accordance with all these residents. So the association is allowed to conduct a background check before they make a decision to hire someone. And that's not illegal, that's totally fine, right? Yes, definitely. Well, they're gonna be, you know, that person is gonna be working with all the owners and, you know, the various residents, their children, et cetera. So, yes, they need to know the background. Yeah, we have about five minutes left and we're gonna cover a little bit about, you know, some resolutions passed in the legislature this year. So before we start, we want our audience to have a little bit of understanding about what is a resolution and what's the difference from a bill? Oh gosh, now that I did not look up. I know a bill is going to become law. A resolution is, I'm looking at it as an urging. The legislature is urging that, it's like a policy and they're urging that the parties abide by this particular policy. So, you know, for example, one of the resolutions I think we were talking about was Senate Concurrent Resolution 48, for example. And the purpose of that particular resolution and the intent of it is to request that the insurance division conduct a study analyzing whether the implementation of a captive insurance system in this state that is modeled after Massachusetts captive insurance system may provide an alternative to traditional condominium property insurance. At a time when insurance in the state of Hawaii, the rates for condominium insurance is just skyrocketing. So, you know, the people have been crying out to the legislature and the legislature is listening and looking for alternatives because unfortunately we've had a number of insurers that have left the state and so our availability is decreasing quickly. Yeah, and also I think as part of this resolution the legislature actually mentioned part of the reason is caused because of the fire safety compliance rule as in place. I expected a consequence on the pricing tag. Anyway, we also have two, like a sort of a very similar resolutions passed. It's all regarding, you know, educations of the condominium boards and they're really emphasizing more education on like several, you know, issues. A code in both, you know, the HR 106 and also concurrent resolution at CR 124. And what are these six, you know, areas that the legislature want the DCCA to develop, you know, or educate the condominium unit owners and board directors about? Sure, both of these resolutions are basically, they say the exact same thing. They're concurrent resolutions. And the first one is they want, they want associations to be educated, concerning. And when I say associations, I'm talking about both owners and board members on effective condominium governance practices, including the importance of maintaining open and frequent communication. In the legislature, you'll often hear people testifying about they, you know, they can't communicate with the board. The board won't give them an opportunity to talk at the board meetings, et cetera. So the legislature is concerned about the ability to communicate and they want to improve the communication back and forth between the owners and the board. Another area is the purpose of the governing documents and how they guide condominium management. You know, if everybody would read the governing documents, it would simplify matters because owners would know what they can and cannot do. Board members would know what they can and cannot do as well. And, you know, both groups need to know this information. Another was the obligations of unit owners and board members. That also is found in the governing documents. The interplay between regular assessments, reserves, capital improvements and special assessments, as well as any other matters related to the effective administration of the association. And then lastly, the dispute resolution process. They want owners and board members to be familiar with that process and including the mechanics of both mediation and arbitration because as you know, owners are utilizing both of those processes more and more as opposed to filing a complaint and going in court, you know, before a judge. It's very costly and mediation certainly for condominiums is much cheaper because in many instances, it's subsidized by the condominium education trust fund. Yes, thank you so much, Larry. I think we've covered all and our time is almost up but I understand there is actually a webinar put together by your organization, Community Associations Institute Legislative Action Committee. Can you, this is your time to advertise for this event if we're on yesterday. Yes, yes, lack the Legislative Action Committee for CAI. It will be putting on a seminar on July 27th, 2023. It will be a webinar and we will have this information going out, I believe it's already gone out, but it's in the process, we're putting it all together now but we will be talking about all the new laws that have passed and by then, we will know which laws have passed and which laws haven't passed. And, you know, we'll also talk about the laws that keep coming up over and over and over again and we'll be talking about. Thank you so much for watching Think Tech Hawaii. If you like what we do, please click the like and subscribe button on YouTube. You can also follow us on Facebook, Instagram and LinkedIn. Check out our website, thinktechawaii.com. Mahalo.